Question

You are a risk manager that needs to hedge the IR risk on a portfolio of bonds. Your hedging instruments are futures and swaps. Discuss how you would go about mitigating sensitivity to changes in the interest rates. You may consider either bucketing the risk or using a holistic approach where you look at dollar duration for the entire portfolio. I suggest you use one of the course calculators to build a curve than price a portfolio of bonds than compute key rate sensitivities. Portfolio duration is the sum of component durations.